A place for a tired old woman to try to figure things out so that the world makes a bit of sense.

Monday, February 06, 2012

A Question Of Priorities

On Saturday I posted about the difference between those such as Donald Trump and Mitt Romney and the rest of us. Consider this a continuation of sorts on that theme.

Meg Whitman, who failed in her attempt to buy the California governorship in 2010, returned to the field where she made her money. She was named CEO of Hewlitt-Packard and was given a potentially astronomical salary by that company's board of directors (on which Whitman now also sits, but in a non-executive position).

Hewlett-Packard Co. ushered in Meg Whitman as its CEO with a $16.5 million compensation package that hinges on the one-time politician's ability to lift the stumbling technology company's stock price during the next two years. ...

The company, which is based in Palo Alto, also had previously disclosed Whitman's salary would be limited to $1 while she tries to rebuild the momentum that HP lost after ousting Mark Hurd as its CEO in a titillating scandal in 2010. [Emphasis added]

On its surface, this looks like a good deal for the company. Whitman performs and she is rewarded more than handsomely. She fails to perform and she gets a buck for her trouble. It's not quite that simple, however.

Whitman, 55, also received more than $372,000 in additional compensation that stemmed from cash and stock grants that she received last year while she was a non-executive director on HP's board.

What I found somewhat intriguing, however, are the benchmarks involved in the calculations for her salary. As emphasized above, they involve stock prices. Not improved market share in the computer industry (which can also be measured) by producing and selling better computers and printers, not by breakthrough innovations by the employees, but by improving the price of a share of stock. In other words, improve the finances of the shareholders, which doesn't necessarily mean improve the health of the company. All that matters is the bottom line of the corporation's financial statement.

And that can be accomplished in all sorts of ways, including selling assets and reducing the work force or moving the manufacturing to offshore sweatshops.